Matt Yglesias has a very perceptive post on industrial policy, which is the latest fad in Washington:
Industrial policy is a hot topic in Biden-era Washington, but it’s hard to get a handle on it because nobody is totally sure what it means.
We know what it’s not — it’s not a continuation of the free trade consensus associated with the pre-Trump years. It’s also supposedly not just crude protectionism that props up inefficient companies that happen to have political clout in congress. It’s supposed to be something better and more sophisticated than that, the deliberate cultivation of areas of national economic strength in a manner inspired by the economic growth success stories of Japan, the “Asian Tigers,” and China.
I think that’s right, but on closer examination it’s an odd claim. The US has a per capita GDP of about $80,000, while Japan is at $52,000 in PPP terms and China is around $23,000. (The East Asian economies are even lower if you use market exchange rates.) So why are we inspired by economies that are far below our level?
You might point to some rapid growth rates in East Asia, but ever since the 1990s Japan has plateaued at a level far below the US. China is likely to follow suit.
In addition, I see little evidence that industrial policy explains the success of East Asia. Consider:
1. All countries do lots of industrial policy, and that includes the US.
2. China boomed after it dramatically reduced the role of the government in the economy.
3. Hong Kong does much less industrial policy than other countries, and yet is one of the most successful of the “tiger economies.” If industrial policy explains East Asia’s success, why isn’t Hong Kong a laggard?
4. Many of the biggest success stories in East Asia occurred in areas not favored by planners—such as Honda making cars.
The Biden administration is pro-industrial policy and pro-labor union. Yglesias points to a contradiction:
And I think that, for progressive-minded people, this is a bit of a conceptual trap around the idea of industrial policy. From inside an academic bubble, you can resent the hegemonic dominance of free market capitalism and dream of owning the neolibs by embracing industrial policy. But the go-to move of a developmental state is to be more hostile to worker interests than a free market would be. In the old New Deal interpretation of American history, this is why Hamilton was the bad guy and Thomas Jefferson was the good guy — it was regressive tariffs versus the interests of small farmers. Today’s liberals care more about racial justice issues, where Jefferson is the bad guy and Hamilton is the hero, but the basic economic tension remains. The Hamiltonian strategy isn’t free markets, but that doesn’t mean it’s pro-worker. It arguably means the opposite.
Those East Asian economies that inspired our industrial planners were basically hostile to organized labor. But the US is not trying to turn peasants in factory workers. A sensible industrial policy for the US would be one aimed at making our economy more efficient. Here’s Yglesias:
A real industrial policy for a rich country should involve finding ways to reduce regulatory burdens on the industry you’re trying to foster. If you’re not doing that, you’re going to be stuck either suppressing wages or else just engaging in basic protectionism — give the industry preferred access to the domestic market and forget about global competitiveness — which is really a different beast altogether.
READER COMMENTS
Michael Sandifer
Oct 13 2023 at 9:42am
Yes, and these should be distinguished from national security policies. Few disagree that there are some technologies we should produce at home for national security reasons, but those are exceptions. Generally, we should be for free trade, if we care about efficiency.
But, particuarly as long as a handful of swing states have such sway in elections, we’ll engage in protectionism and pro-union policies. There’s seemingly no choice, politically, unless another way can be found to satisfy the swing voters in those states.
Would more economic security via a negative income tax work? It may do just enough, but who knows? This is about more than just the personal insecurity people feel. In polls, for what they’re worth, many report feeling good about their personal situations relative to those of the country at large.
Matthias
Oct 13 2023 at 7:53pm
Even most of the goods often mentioned as needed to be produced at home for national security reasons are not so clear cut.
For most of them, it would be just as good if they were produced in Canada or other reliable and stable allies.
The national security justification is mostly just used as a fig leaf for protectionism.
Neil S
Oct 13 2023 at 10:04am
Yglesias was so close. If only he had realized that “A real industrial policy for a rich country should involve finding ways to reduce regulatory burdens.”
steve
Oct 13 2023 at 12:22pm
It should mostly be limited to investments in basic research in our areas of interest. The returns on this have been pretty good. A lot of this can even be done with loans which also have a pretty good record.
Steve
Matthias
Oct 13 2023 at 7:54pm
What makes you think the returns from that have been pretty good? Do you have any quantitative data?
jose pablo
Oct 14 2023 at 9:49pm
The returns on this have been pretty good
Compare to what alternative use of the funds?
Leaving the funds in taxpayer’s pockets would have had a pretty good return.
Lizard Man
Oct 13 2023 at 5:12pm
The US needs to be able to procure a larger arsenal than its enemies and rivals and withstand cessation of trade with China if China attempts to invade Taiwan. Neoliberal trade policy, especially with regards to China, is incompatible with that. Preparing to fight China to preserve the independence of Taiwan and to prevent China from becoming a regional hegemon probably requires a reduction in economic efficiency. This is the fault of China for not recognizing Taiwanese independence and for preparing to invade it.
Matthias
Oct 13 2023 at 7:57pm
Even if we take those claims at face value, that might at best be a justification for trading less with China, Russia and other rivals.
But industrial policy and national security interests are often a fig leaf for protectionism that restricts imports from long-standing and stable friends and allies in NATO as well. Especially Canada, which doesn’t even have an ocean to separate it from the US.
Jose Pablo
Oct 14 2023 at 10:19pm
restricts imports from long-standing and stable friends and allies in NATO
And rightly so if Lizard Man’s idea that what should inspire trade policy is protecting us against “enemies and rivals”. After all Germany and Japan were the last significant “enemies and rivals” of the US. So, we better restrict German and Japanese imports.
And if you go even further back in history, things get worse. Trade policy should “protect” the US from Mexico, a real “enemy and rival” Americans actually fight a war against.
Or even worse, trade policy should be about protecting the American northern states from the southern secessionist ones. After all they fought a very real war.
If there is one thing we know about history, is that it tends to repeat itself, and most wars are either “civil” or against neighboring nations. So, please, stop interstate trading and trading with Canada and Mexico immediately!
Jon Murphy
Oct 14 2023 at 8:04am
Interesting take. It’s a little unclear what you mean by “neoliberal trade policy,” but by the context of the post I assume you mean the pre-Trump consensus of liberalizing trade.
Which leads me to a couple of questions:
First: what evidence do you have to support your claim?
Second: What is unique about China? Neoliberal trade policy has not harmed the US’ ability to defend itself in the past. Indeed, neoliberal trade policy helped defeat two major aggressive industrial powers we did substantial trade with: the Axis Powers in WW2 and the Soviet Union. What is unique about China where the same policy that allowed us to be the world’s arsenel for the past century suddenly is “incompatible” with that goal?
Lizard Man
Oct 14 2023 at 8:49am
China is developing the capacity to deliver lots of troops across the Taiwan Strait. This is totally unnecessary to defend China’s current borders, and only makes sense if the goal of China is CPC control of Taiwan. https://www.forbes.com/sites/davidaxe/2021/07/27/thousands-of-ships-millions-of-troops-china-is-assembling-a-huge-assault-flotilla-for-a-possible-attack-on-taiwan/?sh=19a68bbb751b
Lizard Man
Oct 14 2023 at 9:42am
China is the first rival to face the US where the US and its allies don’t have an enormous advantage in manufacturing capacity, which makes it different from the Axis and the Soviets. Neoliberal trade with reliable allies is good for the US’ effective military power, as it increases the manufacturing capacity available to the allies. More trade with China (especially in manufactured goods) doesn’t increase the manufacturing capabilities of the allies, and unlike WWII or the Cold War, the allies don’t have enough capacity to give them a decisive advantage. More trade between the allies does increase their manufacturing capacity, and unlike with the Axis or Soviets, the allies don’t have a large relative surplus of capacity.
Jon Murphy
Oct 14 2023 at 9:49am
No, that’s not true. At the start of WW2, the Axis powers had higher manufacturing output than the Allies.
Basic theory and evidence says otherwise. What evidence do you have to support your claim?
Again, theory and evidence say otherwise. What evidence do you have to support these claims?
We need evidence to support your claims. All we have right now are irrelevant assertions. You need to 1) demonstrate the relevance of your assertions to your argument, 2) provide evidence supporting your assertions
Jim Glass
Oct 15 2023 at 12:05am
What?
Jon Murphy
Oct 15 2023 at 7:34am
Yes. Recall that the US was still struggling with the great depression. A lot of idle and unemployed resources.
Jon Murphy
Oct 15 2023 at 9:07am
Let me be more clear:
Recall it took the US a long time to ramp up for war. In the initial days, the Axis were on strong war footing. Once the US got cranking, we became the war arsenal. But it did take a little bit to get there.
Either way, the US’ experience in the US and Cold War exposes Lizard Man’s hypothesis for the nonsense it is.
Warren Platts
Oct 15 2023 at 5:34pm
Granted, GDP is not the same as manufacturing output (although I’m glad to see you’ve come around to the view that manufacturing output is crucial for warfighting capacity since the Ukraine War has disproved your earlier stockpile theory). But, for what it’s worth, if we look at GDP (in 1990 international dollars), in 1939, USA’s GDP was $869 billion whereas the combined GDPs of Germany, Japan, and Italy were only $746 billion. And just eyeballing the graph, it looks like USA’s economy was growing faster than the other powers. However, at the time, USSR was arguably part of the Axis, so if we add USSR’s GDP, total Axis GDP was $1,112 billion. But if we add UK’s and France’s GDPs to USA, the total Allied GDP at the start of the war was $1,355 billion.
Estimated annual gross domestic product (GDP) of the Second World War’s largest powers from 1938 to 1945
Jon Murphy
Oct 15 2023 at 5:51pm
I never denied manufacturing is important. And I do not know what “stockpile theory” you’re referring to.
Further, GDP is useless during this period because of a lack of market prices during the Great Depression. It’s not a good proxy.
Jon Murphy
Oct 14 2023 at 9:59am
Actually two more quick points of fact on your claim:
First, according to the Federal Reserve, the US alone has more spare capacity than at any point during the Cold War (we don’t have data going back to WW2).
Second, if you claim is true, than reducing trade with China would weaken US military capabilities. Currently, the US produces virtually all of its military goods and their inputs. We import from China primarily consumer goods. If we were to cut off trade from China, the US would have to absorb that manufacturing. If we have little spare capacity, then some manufacturing resources (labor, land, capital, etc) that was going to military goods would be transferred to consumer goods.
Jim Glass
Oct 14 2023 at 8:49pm
What? China has no allies, unless you count North Korea. The “US and its allies” include NATO, the European Union, Japan, South Korea, Australia, all of whom are getting more angry at China by the day, plus new deals with Vietnam and the Philippines. The closer countries are to the CCP the more alarmed they are getting. Japan and South Korea just signed a military cooperation deal looking at China and they hate each other.
Tally up the manufacturing capacity in those two camps — then forget it. The military concern now isn’t manufacturing like in WWII, it’s technology. That’s why the US is clamping down on chips, not steel and cars like in olden times. (The EU looks to be prepping now for a trade war with China over cars, but that’s just old fashioned protectionism.)
Warren Platts
Oct 15 2023 at 5:37pm
I would call the Russian Federation an ally of China, and you could also throw in Iran and probably Pakistan as well and maybe places like Cambodia and Sri Lanka.
Jim Glass
Oct 15 2023 at 12:18am
Nah. US trade with the Soviets was minimal, in the 1980s about 1.5% of US exports and 0.2% (!) of imports.
Plus, the USA, NATO and Japan had a strong coordinated policy to block transfers of technologies with military value to the Soviet Union and Communist block, post-WWII through the fall of the USSR. See: CoCom. Historians deem it one of the things we did well during the Cold War.
I mean, c’mon. One can be 100% pro-free trade and 2nd Amendment gun rights too — but you still don’t sell guns, bump stocks, ammo and related accessories to people who arm up threatening to shoot your neighbors, friends, family, and maybe you. We weren’t that stupid.
As to the Axis…
Jon Murphy
Oct 15 2023 at 7:36am
Right, but that’s the 80s while the USSR was collapsing. I’m talking over the life of the USSR.
Mark Brophy
Oct 14 2023 at 7:14pm
Preventing China from becoming a regional hegemon isn’t in our interests, it’s a means of justifying military spending. Ike was right, we spend too much on weapons because the arms merchants have usurped the government.
Franzish
Oct 14 2023 at 6:34am
2. China boomed after it dramatically reduced the role of the government in the economy.
The government’s role was never decreased, just repositioned. They went from the forefront, like most other socialist countries, to the shadows and worked from there.
Warren Platts
Oct 15 2023 at 5:41pm
Michael Pettis has written extensively making the same point. And he ought to know as he’s lived in China for decades now.
Jon Murphy
Oct 15 2023 at 5:49pm
Well, it was dramatically reduced. Private property became way more acceptable. Foreign capital controls were reduced. Trade barriers dramatically reduced or eliminated.
Richard Fulmer
Oct 14 2023 at 9:22am
“Hegemonic dominance” seems to me to be an odd term for an emergent system that is the result of millions of free people choosing to exchange (or choosing not to exchange) their goods and services. Capitalism is profoundly (small “d”) democratic.
Such a term seems far more appropriate for a system that – like industrial policy – is coercively imposed from above.
Warren Platts
Oct 14 2023 at 11:54pm
This is absolutely false. The American System did not worry about “global competitiveness” because the American market was big enough to grow the economy through domestic consumption rather than exports. Indeed, USA ran a trade deficit for most of the 19th century despite crazily (by 21st century standards) high tariff rates. 19th century protectionism was explicitly trying to keep wages propped up for American workers because high wages = high consumption = high GDP growth rates. This is very different from the export-led growth models of East Asia and other mercantilist nations (like Germany) that rely on suppressing wages in order to “globally competitive”.
The proof that the Hamiltonian strategy was pro-worker may be found in this poem I discovered in a 19th century protectionist magazine:
Just a Few, Plain Words:
No, I can’t write highfalutin’,Or highbrow; no, not I. ‘And I cannot quote statisticsLike a scientific guy;But I guess my pals and shopmatesCan catch on to what I say.When I tell them that ProtectionStands for steady work and pay.
All the economic problemsWhich the college men discuss,And the theories of professors,Cut but little ice with us:But we know that Free-Trade alwaysUnder labor puts the skids,And that we must have ProtectionTo care for the wife and kids.
When the waistband of your trousersYou must reef to take in slack,They may tell their Free-Trade pipe dreamsTill their faces all grow black;For we have been up against it,And we know it is a sham;And all workingmen will tell youIt ain’t worth a tinker’s dam.—JACK WILEY.
Jon Murphy
Oct 15 2023 at 9:22am
If the best proof you can find is a political propaganda piece that explicitly says it doesn’t have evidence to support its contentions, then Scott’s point is just all the stronger.
Warren Platts
Oct 15 2023 at 4:56pm
You didn’t read very carefully. The poem refutes Matty’s point where he says, “that [The Hamiltonian strategy] doesn’t mean it’s pro-worker. It arguably means the opposite.” Look, if American workers say that protection is in their best interest, it’s pretty condescending, at best, for us to say that they don’t know what’s in their own best interest. And the guy does provide evidence: “When the waistband of your trousers You must reef to take in slack … we know [free trade] is a sham.”
Jon Murphy
Oct 15 2023 at 5:47pm
If you ask my 4 year-old niece whether Santa Claus exists, she will say yes. And she will fervently defend that position. I guess it would be quite arrogant for me to say she is wrong and the presents actually come from her parents.
Still, if poetry is all you need for evidence, here’s one for ya that proves free trade is good.
Warren Platts
Oct 16 2023 at 2:46am
Interesting! So adult working class folks are like 4 year-olds who believe in Santa Claus. Thus, you’ve just denied the most fundamental premise of economics: that adult humans are more or less rational creatures that can decide for themselves what is best for themselves. Hence the need for unelected technocrats. such as yourself, to decide what is best for them. Noblesse oblige right? We are still waiting, however, for the flour & sugar to flow so we can eat the cake…
Jon Murphy
Oct 16 2023 at 7:42am
Please re-read my comment and respond to what I actually wrote as opposed to…whatever this is.
Warren Platts
Oct 16 2023 at 3:57pm
Yes, that was a nice animation by Russ Roberts. What it proves, though, is that Russ Roberts thinks free trade is in his best interest, just as that poem by Jack Wiley shows that he thought protectionism was in his best interest.
In general, as James Buchanan cynically pointed out, people tend to be self-dealing even when they don’t realize it and even when in fact they believe they are acting out of a commitment to noblesse oblige to help out the peasants.
Economists tend to be fairly well paid, and are thus part of the laptop class. Therefore, it is not surprising they generally advocate policies that just happen to raise real wages for the laptop class. The damage to the working class is rationalized away by saying at least their grandchildren will be better off (Dr. Boudreaux actually argues this), or that the gains to the winners are more than enough to compensate the losers. But as I said above, the sugar and flour never seems to flow.
Richard Fulmer
Oct 15 2023 at 9:16pm
Warren question: Why do you want to put Washington elites in charge of American business and trade?
Warren Platts
Oct 15 2023 at 12:00am
Wait. Isn’t this what Trump was trying to do (and was largely successful at)? University of Chicago economist Casey Mulligan documented that Trump’s deregulation efforts saved the U.S. around $500 billion per year in needless economic costs.
Jon Murphy
Oct 15 2023 at 7:39am
Trump did a lot of good deregulation. But note that the industries he tried to foster (semiconductors, computer chips, steel, etc) he often slapped more regulations on in the form of tariffs and the like.
Warren Platts
Oct 15 2023 at 5:05pm
I don’t think tariffs are properly called regulations because tariffs are not published in the Code of Federal Regulations (CFR). Correct me if I’m wrong. The regulations Trump was going after are in the CFR. As for Trump’s tariffs, at least some of them did what they were supposed to do: e.g., the washing machine tariff caused two other companies to build greenfield factories within the U.S., thus increasing employment, production and competition within the U.S.
Jon Murphy
Oct 15 2023 at 5:44pm
Ok, fine. That’s a distinction without a difference here. Tariffs have the same effect as regulations in that they increase the cost of doing business. Furthermore, I’d argue that a tariff that has the explicit goal of influencing firm behavior is properly called a regulation.
Be precise. Employment, and production of what? By definition of a tariff, competition is decreased, so we can dismiss your last claim out of hand. But your first two are sufficiently vague that it could be true (but irrelevant) or false (but significant) depending on your unspoken assumption.
Warren Platts
Oct 16 2023 at 4:09am
It’s a washing machine tariff? Therefore, employment and production of washing machines increased.
By definition? No. That’s a mere insinuation, a shibboleth of free trade economics. Prior to the tariff, there were like 3 companies still making washing machines in the U.S. Thanks to the tariff, there are now 5 companies within the U.S. making washing machines. Presumably, the more companies making a particular widget, the more competition there is. Since 5 > 3, then competition among washing machine makers within the USA has increased. If you’ll read 19th century protectionist literature, that is one expected result of a tariff: increased competition behind the tariff screen.
Jon Murphy
Oct 16 2023 at 7:39am
Gotcha. So, the claim is the “true but irrelevant” category. About 1,800 jobs were shifted to washing machines at an annual net cost (benefits minus cost) of about $815,000 per job as approximately 108-225% of the tariff was passed on to the consumer (Flaaen, Hortacsu, Tintelnot 2020).* Those 1,800 jobs necessarily came from elsewhere in the economy. On net, tariffs do not create jobs; they just reallocate existing ones.
By definition yes. The goal of a protectionist tariff is to protect against foreign competition.
Recall that competition will bring prices down, all else held equal. If firms are earning a markup of P>MC, then competition will bring P closer to MC. As we see, the tariff increased prices (all else held equal). Even firms that were not affected by the tariff increased their prices. P rose, not fell.
Further, this whole “number of companies behind the tariff screen” is irrelevant. What determines competition in a market is the number of firms operating in the market not in some geographic location. If the number of firms operating in a market falls from 1,000 to 5, but the number in a geographic location increase from 3 to 5, then competition fell not increased.
So, your mere assertion that protectionist tariffs increase competition can be dismissed both on definitional and empirical grounds. By definition, they intend to protect against foreign competition. Empirically, they resulted in fewer firms and higher prices.
Recall that, as economists, we need to measure all costs and all benefits to all parties. We cannot pick and choose what to measure. If you just cherry-pick incomplete and/or irrelevant data points, you’re going to miss the story.
*These costs are likely higher now given inflation and the pandemic response.
Warren Platts
Oct 16 2023 at 3:45pm
Jon, you seem surprised that the washing machine tariff behaved pretty much as predicted by Econ 101 theory (well, or maybe a more advanced class since the tariff was 20%, yet prices only went up by 11 or 12 percent, seemingly generating a nice terms of trade gain — I wonder if that outweighed any deadweight losses?).
Yes of course the tariff reduces competition from foreign producers who pay their workers a fraction of U.S. wages if they’re not using outright slave labor, typically carbon intensive production & otherwise crappy environmental & unsafe labor conditions. That’s the goal of the tariff. Nonetheless, it increases competition behind the tariff screen as was empirically proved with the washing machine tariff.
Also, you’re equivocating on the word “geographic area” as if all geographic areas are the same. My claims are strictly restricted to the USA. What’s good for the USA may not be best for China or Burkina Faso. The U.S. is continental-sized and the largest consumer market on Planet Earth by far. Thus we can grow our economy largely with just our own consumer demand. I wince whenever an economist says we need to be more “competitive”; that’s code for “wages are too high.” All free trade has done for the USA is generate the largest trade deficits in world history (NIIP was 60% of GDP last I checked — about the level historically when bad things start to happen in an economy).
As for the 1,800 jobs necessarily coming from elsewhere in the economy, that’s not necessary. The new workers could have been unemployed or they could have come from the vast pool of able-bodied people who are technically not considered part of the labor market. But if they stole workers from other enterprises, SO WHAT? If someone quits a low-wage job in order to take a high-wage job, that’s somehow supposed to be a bad thing for the economy? Perhaps you could explain that logic because I don’t understand it.
I also find it extremely disingenuous when you economists complain about “cost to consumer per job” with the higher the number, the worse it is. Seriously, who are you guys trying to fool? After all, what is the cost to consumer for any good or service? Answer: the value-added aka GDP. Thus the cost-to-consumer (value-added) per worker is simply a measure of the productivity of that worker. When a drilling company builds a new oil rig & hires new workers, the cost-to-consumer is $2 million each. Whereas a new fast-food restaurant, the cost-to-consumer for the new jobs is only $30,000 each. You tell me Jon: Which new job is better for the economy, the new roughneck or the new burger flipper?
Jon Murphy
Oct 16 2023 at 7:05pm
I’m not surprised at all; ’tis exactly as I predicted. And the study I linked to disproves your parenthetical. There were no terms of trade gain. The consumer ate over 100% of the tariff (108-225%) for a deadweight loss of $1.5b (pg 2105-2106).
The rest of your comment is incoherent. Rather than try to parse what you’re trying to say, I’ll just rest my case here. If all you can cite is a failed tariff that generated $1.5b in net costs and a political propaganda poem in support of protectionism, then the case for free trade remains unharmed.
Warren Platts
Oct 16 2023 at 8:21pm
The percentage-wise cost to consumer was more than the tariff rate because they incorporated clothes dryers, in addition to washing machines, into their analysis. Note also that the upper and lower range of their estimates differ by a factor of 2. That’s some pretty big error bars.
Also, the $1.5 billion was “increased consumer costs,” (page 2106) not deadweight losses. Increased consumer costs ≅ increased producer revenue, so it’s pretty much a wash in terms of net welfare.
In fact, they didn’t even try to estimate any deadweight losses. Or, more likely, I suspect they did estimate deadweight losses, but the the deadweight losses were so trivially small that reporting such small losses wouldn’t fit in with the narrative they’re obviously trying to sell: that tariffs bad!
Richard W Fulmer
Oct 17 2023 at 5:35pm
What is the moral case for coercively transferring $1.5 billion from consumers to producers? Do we need domestic washing machine and clothes dryer manufacturers in the event of war?
Jon Murphy
Oct 18 2023 at 12:36pm
One should note, Richard, that the $1.5 billion net loss here is just from the washing machines (I emphasize net because there appears to be some confusion on that point). The net cost of the entire trade war is about $1.4 billion per month.
Richard W Fulmer
Oct 19 2023 at 9:28am
Ok, what is the moral case for coercively transferring $1.4 billion from consumers to producers every month?
Richard W Fulmer
Oct 15 2023 at 2:07pm
It seems to me that regulation, and not free trade, is the real problem. Free trade does entail short-term pain when domestic suppliers face better or cheaper foreign products. However, in a free market economy, alternative business lines and jobs are readily available. Unfortunately, in our less-than-free economy, laws and regulations such as minimum wage laws, employer and employee mandates, occupational licensing, certificate-of-need laws, business startup restrictions, zoning laws that prevent people from working from home, and government-granted monopolies and subsidies all work to reduce or eliminate people’s ability to quickly react to changing economic conditions.
Protectionism can prevent short-term pain at the cost of far more pain in the long run. Consider Japan’s dilemma when, after 220 years of isolation, Commodore Perry steamed into Edo Bay and dictated a trade agreement at gunpoint. The Japanese, cut off from western technology, were virtually helpless in the face of only four state-of-the-art ships.
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